Performance Management

Everything you need to know about performance management.

Performance management can be defined as the development of individuals with competence

and commitment, working towards the achievement of shared meaningful objectives within

an organization which supports and encourages their achievement.

According to Michael Armstrong and Angela Baron – ‘Performance management is a

process which contributes to the effective management of individual and teams in order to

achieve high levels of organisational performance.’

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Learn about:-

1. Introduction of Performance Management

2. Meaning of Performance Management
3. Definitions
4. Objectives
5. Scope
6. Aims
7. Utility
8. Dimensions
9. Types
10. Principal Keys to Managing Performance
11. Concerns
12. Steps
13. Environmental Context
14. Functions
15. Significance or Importance
16. Comprehensive Design
17. Implementation.

Performance Management: Introduction, Meaning, Definition, Objectives, Scope, Aims,

Utility, Dimensions and a Few Others

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 Contents:
1. Introduction of Performance Management
2. Meaning of Performance Management
3. Definition of Performance Management
4. Objectives of Performance Management
5. Scope of Performance Management
6. Aims of Performance Management
7. Utility of Performance Management
8. Dimensions of Performance Management
9. Types of Performance Management
10. Principal Keys to Managing Performance
11. Concerns of Performance Management
12. Steps of Performance Management
13. Environmental Context in Performance Management
14. Functions of Performance Management
15. Significance or Importance of Performance Management
16. Comprehensive Design of Performance Management
17. Implementation of Performance Management System

Performance Management – Introduction

Performance management includes activities to ensure that goals are consistently being met

in an effective and efficient manner. Performance management can focus on performance of

the organization, a department, processes to build a product or service, employees, etc.

Performance management can be defined as the development of individuals with competence

and commitment, working towards the achievement of shared meaningful objectives within

an organization which supports and encourages their achievement.

Michael Armstrong have defined performance management is a strategic and integrated

approach to delivering sustained success to organizations by improving the performance of

the people who work in them and by developing the capabilities of teams and individual

contributors.

Performance assessment has a long history based on comparative judgements of human

worth. In the early part of the 19th century, for example, Robert Owen used colored wooden

cubes, hung above work stations, to indicate the performance of individual employees at his

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New Lanark cotton mills in Scotland. Various merit ratings were represented by different

colored cubes which were changed to indicate improvement or decline in employee

performance.

Performance Management – Meaning: Suggested by Armstrong, Baron,

Pointon and Ryan
Some of the authorities recently have used the expression ‘performance management’ in the

place of traditional employee evaluation/performance appraisal. It is described as a

systematic and strategic approach to ensuring that employees’ performance, as individuals

and team members, enables the organization to achieve competitive advantages by producing

the level and quality of products and services that lead to customer satisfaction, and, thereby,

the achievement of objectives and the ultimate realization of strategy.

A strategic and integrated approach to delivering sustained success to organisations by

improving the performance of the people who work with it, and by developing the

capabilities of teams and individual contributors. – Armstrong and Baron, 1998

Performance management (more accurately forms of performance related pay) has formed a

key activity for managers and management in the quest to increase the benefits gained by the

application of labour power. – Pointon and Ryan, 2004.

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Performance management is a process that enables the workforce by way of creation of an

environment in which they can perform to the best of their abilities. Performance

management begins with describing a job. Performance appraisal is often used as an alternate

term to performance management. The process ends when an employee leaves an

organization.

A performance management system includes the following actions:

1. Developing clear job descriptions

2. Determining competency sets and selecting people through an appropriate selection

process

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 3. Negotiating requirements and accomplishment-based performance standards,

outcomes, and measures

4. Providing effective orientation, education, and training

5. Imparting on-going coaching and feedback

6. Conducting quarterly performance development discussions

7. Designing effective compensation management and recognition systems that reward

people for their significant contributions

8. Providing promotional/career development opportunities for staff.

Performance Management – Definitions: Given by Ronnie Malcom, John Storey,

Michael Armstrong and Angela Baron, Dr. T. V. Rao, Manuel Mendonca and R. N.
Kanungo

According to Ronnie Malcom – ‘Performance management may be defined as a planned and

systematic approach to managing the performance of individuals ensuring their personal

development and contributing towards organisational goals.’

According to John Storey – ‘Performance management includes the whole cycle of agreeing

goals and objectives (which may vary in their degree of specificity), providing feedback,

offering coaching and advice and motivating staff to perform at a high level.’

According to Michael Armstrong and Angela Baron – ‘Performance management is a process

which contributes to the effective management of individual and teams in order to achieve

high levels of organisational performance.’

According to Dr. T. V. Rao – ‘Performance management involves thinking through various

facets of performance, identifying critical dimensions of performance, planning, reviewing

and developing and enhancing performance and related competencies.’

According to Manuel Mendonca and R. N. Kanungo – ‘Performance management refers to

the process of setting and communicating performance targets, defining evaluative criteria to

be employed at different levels of performance, monitoring performance, reviewing

performance, providing feedback and taking corrective measures to remove performance

snags.’

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For a long, within the HR practices, the organisations have little or no insight into their

employees’ skill and performance, they don’t pay their attention towards the learning and

development aspects. The concept of performance management has been the most significant

development in the sphere of HR management in recent time.

Performance management was first introduced by Michel Beer (1976) as a distinctive

approach with an innovative appraisal and development system, it was based on the

observation, ordinary evaluation and measuring the quality and quantity of production as

produced by employees.

It was gained popularity in the 1980s with the advent of the total quality management (TQM)

programme. For the last two decades, some of the foremost companies like Philips, Mafatlal,

Cadbury India, Sandoz and Proctor & Gamble have redesigned their performance system

based on new appraisal modules.

With the evolution of the concept of performance management, the nature of HR

management in organisations has undergone drastic changes in the recent past. Performance

management is now an accepted HR management practice in many organisations. The

emphasis has been shifting from ‘command and control system’ towards a ‘commitment

based system’.

This changes a reflection of the growing importance of responsive viewpoints of employees

and their work performance to the attainment of objectives and strategy of organisations.

Performance Management – 9 Main Objectives

The major objectives of performance management system are enlisted below:
1. To emphasise on career planning and future growth opportunities for employees;
2. It is ensuring to raise the efficiency and productivity of employees;
3. To encourage belongingness, team spirit and devotions among employees with the
job;
4. To provide feedback about HR planning and potentialities to implement the planning
facts;
5. To identify systematically the need and requirements of some learning and training
aspects;

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 6. To promote better and high work culture in the organisation;
7. To focus more on systems approach to perform appraisals rather than to make any
formalities;
8. To foster a positive relationship between managers and employees through a two-way
communication process;
9. To appreciate, recognise and to give reward and compensate employees for
achievement of performance objectives successfully in a more objective, transparent
and justified way.

Performance Management – Scope

The principal purpose of performance management is to develop and nurture talents in an

organization. Job performance (also work performance or simply performance) was

considered to be a special case of psychological measurement that provided a quantitative

description of the extent to which individuals demonstrated certain characteristics, properties,

or traits.

Performance measurement involves the methods or procedures that quantitatively provide the

extent to which employees demonstrate certain work behaviours and the result of those

behaviours. The work performance of a group of individuals employed in common jobs

revealed considerable individual variation. McCormick and Tiffins (1980) reported that the

ratio of the least productive workers productivity to that of the most productive worker’s

varied from 1:2 to 1:3 for various kinds of productive jobs.

Such a wide variation in work performance was attributable to multiple causes. Dwivedi

(1990) defined performance appraisal as a continuous line function, which, if performed

objectively, exerts motivational impacts on individuals.

Performance appraisal is different from performance management.

The Performance management cycle is mostly aligned with financial year of the company.
The performance planning is important because it:
a. Creates awareness about ‘the big picture’ i.e., Organization’s vision, mission and

goals.

b. Communicates expectations clearly and hence provide role clarity.

c. Aligns individual goals to organizational goals.

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 d. Ensures individual commitment towards goals.

Performance Management – Aims

The overall aim of performance management is to establish a high performance culture in

which individuals and teams take responsibility for the continuous improvement of business

processes and for their own skills and contributions within a framework provided by effective

leadership. Its key purpose is to focus people on doing the right things by achieving goal

clarity.

The various other aims of performance management are as follows:

1. Empowering, motivating and rewarding employees to ensure their best efforts and

performance.

2. Ensuring that the employees emphasize on doing the right tasks at the right time.

3. Ensuring effective alignment of individual goals along with those of the organization.

4. Ensuring proactive resourcing and management of employee performance against

agreed performance objectives and accountabilities.

5. Facilitating the linking of job performance to the achievement of the organization’s

corporate strategy and service plans.

6. Facilitating the alignment of individual goals and objectives with those of the tam,

departments/divisional and corporate plans.

7. Ensuring a systematic process and behaviours by which managers manage the

performance of their people so as to deliver a high-performance organization.

8. Ensuring maximization of the employee potential and capabilities.

Performance Management – Utility

1. It translates corporate goals into individual, team, departmental, and divisional goals,

2. It helps to clarify corporate goals,

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 3. It is a continuous and evolutionary process in which performance improves over time,

4. It is realized on consensus and cooperation, rather than control or coercion. It

encourages the self-management of individual performance. It requires a management

style that is open and encourages two-way communication between supervisors and

subordinates,

5. It requires continuous feedback, and

6. It measures and assesses all performance against jointly agreed goals. It applies to all

staff, and it is not primarily concerned with linking performance to financial rewards.

An ACHIEVE model has been designed to help managers understand why performance

problems may have occurred and then to develop and change strategies aimed at solving

problems.
The elements in the ACHIEVE model are:
a. Ability (knowledge and skills of subordinates)

b. Clarity (clarity of what to do)

c. Help (organizational help, support)

d. Incentive (motivation or willingness of subordinates)

e. Evaluation (coaching and performance feedback)

f. Validity (of personnel practices)

g. Environment (external factors that can affect individual performance even if he/she

has all the ability).

In using the ACHIEVE model, managers must know and evaluate how each factor will affect

the present or potential performance of staff members for a given task. Performance is said to

be affected by motivation and ability, role perception or job understanding, and

environmental and organizational support. The ACHIEVE model is stated to affect

performance by providing feedback (telling subordinates as to how well they are doing), and

analysing the validity of personnel practices such as appraisal, training, promotion, and

dismissal.

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Performance Management – 7 Important Dimensions: Result and Output,
Input, Time, Focus, Quality, Cost and Output
It involves thinking through various facts of performance, identifying critical dimensions of

performance, planning, reviewing, developing, enhancing performance and related

competencies.

Performance has many dimension:

Dimension # 1. Result and Output:

The most acceptable and measurable dimension of performance is result and output. It

describes the conditions of inputs which included raw material, working conditions, process

capabilities and talent of employees in the final form of product or service. It is necessary to

plan all the performance activities in a scientific and systematic manner so that the desired

result or output may be obtained.

Dimension # 2. Input:

This dimension deals with the activities to be accomplished by the employee. Performance

can be achieved if the nature of inputs can be managed without mistake, because performance

is a function of three sets of factors – ability, motivation and organizational support. If

anyone among these three factor is less the performance is to be poor.

Employee Performance = Employee Competence + Employee Motivation + Organisational

Support
Dimension # 3. Time:

Time is precious and very important dimension of performance. In the current scenario of

world, the performance management is time bound otherwise the survival of organisation is

not possible in the future. Performance of an employee in relation to a given role during

particular period of time under the set of circumstances operating at that point of time.

Therefore, time may become the target.

Dimension # 4. Focus:

Performance also has a focus dimension. For example in case of sales, profits and new areas.

Focus means attention, not only on own activities but should also keep close watch on related

activities.
Dimension # 5. Quality:

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‘Quality is not destination but a journey’. Quality refers to doing the things right from the

first time rather than making and correcting mistakes in order to achieve total customer

satisfaction. It means quality is conformance to customer requirements, not goodness. Higher

is the quality greater is the satisfaction of customers. It is the responsibility of each and every

employee as well as management to build a quality standard which provides reasonable

customer satisfaction at economical cost. Quality is the core dimension of performance

management.
Dimension # 6. Cost:

The ultimate principle of purchasing is the low cost with best quality. Therefore cost

effectiveness is another dimension of performance management. It implies the capacity of a

business unit to produce a given commodity at a lower cost through more effective utilization

of existing resources. It is the process of cost reduction by improving efficiency of

operations.
Dimension # 7. Output:

Output relationships and analysis- It is relevant and essential to understand the input-output

relationships and analysis. The purpose of input-output analysis is to find out the

interdependencies and complexities of the economy in order to determine the conditions for

maintaining balance between demand and supply. It describes the inputs required to produce
the outputs of different sectors of the economy. It also involves the study of the exchange of

goods and services among industries.

The performance appraisal is the part of performance management because the moment

assessing process is started there is an appraisal taking place. Therefore, performance

appraisal is static in nature while performance management is a dynamic process.

Performance management with performance appraisal should lead to increased performance.

The effort should be to make the performance management process more effective and

productive using appraisal system.

Performance Management – Top 3 Types: Traditional Performance Management,

Performance Management in Self-Managed Teams and a Few Others
Type # 1. Traditional Performance Management:

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Performance management in natural work groups usually operates according to the traditional

performance management model in which the focus is on the work performance of an

individual and his or her contributions to the mission of the organization, as observed and

assessed by the evaluating manager.

While the evaluating manager may solicit the input and involvement of the employee in each

step in the process, authority and ultimate responsibility remains with the HR manager or the

HR head of the organization.

Type # 2. Performance Management in Self-Managed Teams:

Performance management in self-managed work team is managed by the team itself. This

empowerment varies from organization to organization, or even from department to

department, and also depends upon the readiness of the team members to assume those

responsibilities.

A fully empowered mature self-managed team would decide their own jobs, set performance

standards, give feedback to members about work progress, performance and team skills,

appraise their own performance, and identify and support the training and development needs

of the members. The organization, particularly the HR department, in this set up will provide

guidelines and a framework for that performance management in terms of organizational

policies and compliance regulations.

Type # 3. Performance Management in Cross Functional Teams:

A cross-functional team typically operates without formal supervision, though it may have a

team leader. Members usually report to evaluating managers in their concerned departments.

These managers are often not present or be aware of what and when the team members are

participating in the work of the team and may only know about the results of the team’s work

and the team member’s performance through the reports of others, evidence of the team’s

products, or via customer feedback. Hence performance evaluation in this case definitely is a

complexes process.

Performance Management – 4 Principal Keys to Manage Performance: Achieving

Radical Clarity around Goals and a Few Others

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Principle # 1. Achieving Radical Clarity around Goals:

Many organizations think they send clear signals, but don’t. In some cases, managers

subordinate broad strategic goals to operational goals within their silos. That’s what

happened with Tom’s top team (Theme Case). Elsewhere, leaders often have too many “top”

priorities — as had been seen in several case illustrations — which results in mixed signals

and blurred focus.

To enable effective performance management, it is important to sort and trim priorities down

to a manageable number. This is true for the organization as a whole, for each department, for

each team and for each individual. The first step toward effective performance management

is for managers to clarify their own goals and objectives.

A recent Hay Group study shows how difficult that can be. The study showed a disturbing

lack of clarity on top teams (organizational clarity measures the extent to which employees

understand what is expected of them and how those expectations connect with the

organization’s larger goals). In fact, the biggest single difference between great top teams and

typical ones was in the level of internal clarity.

Principle # 2. Establishing Systems and Processes to Ensure Clarity:

Once goals are clear, organizations must create systems and processes so as to ensure that

people get the right messages. These processes include- budget and planning sessions; staff
and team meetings to discuss goals; performance management meetings; and talent review

sessions.

Dialogue drives all these processes. Each represents a “transmitter opportunity,” where

managers reiterate goals and monitor behaviour to ensure it’s aligned with goals.
Principle # 3. Aligning and Differentiating Rewards:

HR managers must make sure that rewards encourage employee behaviours consistent with

goals. It is common that almost everywhere managers distribute rewards more or less evenly.

Lack of effective performance dialogue is a key contributor to dysfunctional reward schemes.

Principle # 4. Standards of Performance:

Standards of performance are written statements describing how well a job should be

performed. Performance standards are developed collaboratively with employees, whenever

possible, and explained to new employees during their orientation or induction.

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The performance standard provides a benchmark against which to evaluate work

performance. While the job description describes the essential functions and the tasks to be

done, the performance standard defines how well each function or task must be performed in

order to meet or exceed expectations.

Standards of performance are usually-

a. Developed in collaboration with the employees who do the tasks or functions

b. Explained to new employees within the first month on the job.

Performance standards may be written to different levels of complexity. The more general the

applicability, the harder it is to be specific. Care should be taken so as to assess, whether the

performance standards are realistic, specific, based on measurable data, observation, or

verifiable information, consistent with organizational goals, challenging, clear and

understandable, and dynamic.

Performance Management – Concerns

Performance Management should emphasize upon the following concerns:

1. Emphasizing on front-end planning rather than back-end reviewing of performance.

2. Ensuring emphasis on creating a broader definition of performance that focuses on more

than narrowly defined job responsibilities.

3. Emphasis on creating a constant dialogue rather than depending solely on filling

performance review/evaluation forms and restricting to evaluation/rating scales.

4. Focusing of the reward and recognition aspects of performance.

5. Emphasis on continuous performance improvement and development.

6. Ensuring the enhancement of communication at all levels of the organization

7. Concern for creating value addition to stakeholder needs, interests and aspirations.

8. Creating a long lasting commitment for inculcating fairness, rational and transparent

performance evaluation and development.

Performance Management – 4 Steps in Performance Management Process: Planning,

Action or Execution of Plan, Performance Assessment and a Few Others

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After depth study of various organisations, it is found that in every organisation different

steps have been taken and there is no similarity in steps in performance management process.

It entirely depends upon the requirement of the organisation and the management working

pattern.

Some organisations take help from the consultants and some are having their own internal

experts for scanning the business environment, identifying and prioritizing the goals, fixing

responsibility and accountability, expected performance standards and many more work-

related aspects. In large organisations mostly the below mentioned steps are followed but in

small and further smaller organisations some of the steps may be or may not be followed.

It is summarised that the following steps have been involved in different organisations

in general but exactly not similar in all:

Step # 1. Planning:

Planning is the process in which the future course of actions has been decided in advance.

This helps in giving the direction while performing the tasks. Without planning the objective

of doing the work will not be clear. There may be many confusions such as – what is to be

done, how it is to be done, when it is to be done, etc. That is why to go for performance

management process the first step will be planning.

The first step during which the supervisor and employee accomplish will discuss regarding
current business environment, mission of the organisation, present goals, and jobs to be

performed for achieving the goals. Methods of performing the jobs, competencies needed,

performance standards and assigning the responsibility and accountability of employees are

to be planned. Planning stage will make the whole process working smoothly.

In the beginning the performance management will go for planning of the following

items:

(i) Scanning of Business Environment:

Every business is carried in an atmosphere or surrounding. That is called business

environment. There are internal and internal factors of it. The internal environmental factors

are within control of the management whereas the external factors like social, cultural,

economic, legal, political, technology and competition, etc., are beyond control of

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management. These factors are uncontrollable and out of reach of management to control.

They change, very rapidly and create a lot of uncertainty.

A high degree of risk is involved in the business. For proper and effective planning the study

of environment becomes inevitable. The study of these factors is to be carried out and try to

find out the threats and opportunities for the business of the company. This will provide

inputs to the planning for performance management.

(ii) Mission and Goals:

Every organisation has been established with an objective in the business. The mission shows

the objective of existence in the business. To achieve the objectives the certain goals or

targets are to be fulfilled. The goals are to be decided for everyone concerned. The goals can

be for individuals, team, section, department and organisation as a whole.

The managers, supervisors, and employees through discussion will agree for the goals to be

achieved. The special care should be taken that the goals should be realistic and feasible to

achieve. These should not be beyond capacity to achieve.

(iii) Developing Job Description and Job Specification:

To fulfil the goal requirement the certain tasks are to be decided. What jobs are to be

performed and how these will be performed. First of all the jobs profile is to be prepared. The

work, jobs and tasks are to be ascertained. The decision is to be taken regarding the major
work, its components, level of responsibility, reporting system, location of the jobs and sub-

jobs, etc.

Next, the procedure or method of doing the jobs is to be finalized. In method the involvement

of manpower, machines, equipments and steps for performance of jobs are to be decided.

After finalizing jobs and methods of doing the jobs, the job specification is to be finalized.

For performing the skills, knowledge, educational qualification, work experience, attitude,

ability, capability, the level of risk involved, etc., are to be discussed and finalized. If the

required competencies are available then it is alright.

Otherwise efforts should be there to find out how the required competencies can be acquired

and developed. Finally in this the job responsibility and accountability of everyone is to be

agreed and fixed. This will give the clear guidelines regarding the jobs is to be performed,

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method of performing the job, competencies required for performing the jobs, responsibility

and accountability of the jobs.

(iv) Fixing Performance Standard:

For accomplishment of the goals the jobs are to be performed. Now, what level of

performance is expected from the employees is to be discussed. For fixing the performance

standard the comprehensive discussion should be there among managers, supervisors,

employees, experts in-house and consultants.

The performance standard should be feasible to achieve. These should not be very low or

high. The performance of slow, fast performer may not be suitable for everyone. That is why

the average performance should be taken into account. Performance standards are the

statements that specify what constitutes good work.

The all concerned persons involved in fixing performance standards develop the list of

specific job tasks, and then they write statements that specify how the quality of the work will

be determined. The performance standards should be specific, measurable, attainable,

relevant and time-based.

The performance standards should be decided regarding the quality of work, quantity of

output, with reference to the time taken, manners of work performed, method of doing the

tasks, behaviour and costs involved in performing the jobs. These will give a clear idea to the
supervisors and performers regarding what are expected from them on-the-job, etc.

Next, the procedure or method of doing the jobs is to be finalized. In this method the

involvement of manpower, machines, equipments and steps for performance of jobs are to be

decided. After finalizing jobs and methods of doing the jobs, the job specification is to be

finalized. For performing the skills, knowledge, educational qualification, work experience,

attitude, ability, capability, the level of risk involved, etc., are to be made discussed and

finalized. If the required competencies are available then it is alright.

Otherwise efforts should be made there to find out how the required competencies can be

acquired and developed. Finally in this the job responsibility and accountability of everyone

is to be agreed and fixed. This will give the clear guidelines regarding the jobs is to be

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performed, method of performing the job, competencies required for performing the jobs,

responsibility and accountability of the jobs.

Step # 2. Action or Execution of Plan:

After planning of performance management the next step is action or execution of the plan. If

the plan is good and not implemented properly the result will be poor and poor plan

implemented strongly then many irregularities can overcome. This stage is very important. In

execution stage, the actions are to be taken simultaneously with work.

The action regarding communication of performance plan, coaching, training and education,

motivation and feedback of the performance should be taken by the managers or supervisors

responsible for the jobs. Whatever has been planned by the authority, must be communicated

to all concerned regarding objectives, jobs, methods or procedures, competencies, goals,

responsibility and accountability and performance standards expected from the performers.

This will help a lot in understanding the requirements and confusions will be avoided. This

will help to get the support of everyone concerned. The objective of the planning will be

made easier to achieve if proper, purposeful and timely communication has taken place.

When the need for training and education has been identified, the sincere efforts should be

put to train and educate the people on-the-jobs and off-the-jobs.

This will help to develop knowledge, skills and competencies of the employees. The trained
people will get confidence in the jobs, confidence will give better performance and it will

give further the job satisfaction to the job performer.

During the work there may be many difficulties faced by the employees. The manager or

supervisor must coach and guide the persons if any problem is faced. The problems are to be

solved on the spot. The proper coaching must be carried out regarding the system, its parts,

performance procedure, and most likely difficulties faced on the jobs. This will avoid

confusion on the spot and performance will improve.

This finally will give job confidence and satisfaction to the performers. Another important

action during the work is motivation of the employees. The employees must be motivated by

the managers and supervisors by giving timely support, proper behaviour of supervisors

showing interest in jobs of juniors, rules and regulations are implemented with human touch.

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The motivational aspects will create a desire to work strongly on-the-job. It will contribute to

improve the performance standard related to quality and quantity of output, time, cost and

manners. This is the ultimate goal of the performance management process.

Talented and motivated workforce can create a wonder for the organisation. This may give

the multidimensional benefits to the organisation. Finally the image of the unit may be

created and developed further. When the persons are assigned the jobs and they start

performing, they themselves do not know how they are performing. Time-to-time they must

be informed by the supervisors regarding what they are doing and how they are doing.

Getting feedback the confusions can be clarified. If any problem is faced or confusion is there

then action can be taken by them during the work. This problem will not prolong. People will

work without any work stress. If the managers and supervisors are taking these actions in

time, the ultimate goal of improving the performance will be achieved undoubtedly.
Step # 3. Performance Assessment:

The next phase will be performance assessment or appraisal. After planning and execution of

the plan it becomes necessary to see whether the job is performed as per the planning and

guideline. The performance is to be reviewed. If it is not done then the employees and

managers will not take interest in the whole process of performance management. The

performance will be assessed during the work, mid of the year and finally at the end of the
year. It is a difficult work to be done properly.

The following jobs are to be done in the assessment of performance:

(i) Observation:

Under planning the works have been assigned to the employees. The employees have been

communicated, guided, motivated and feedback taken time-to-time from them. Further, it is

to be seen whether they are doing the work as per expectation and goals set. The managers

and supervisors will observe the working on day-to-day basis.

Whenever they visit to the work, discuss the issues with the employees or interacting, they

must observe the attitude, interest, manner, approach, involvement and output given on shift

or daily basis.

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When employees interact with their peers, supervisors, managers, vendors, clients and other

staff members, the information should be gathered on day-to-day basis regarding their

behaviour and performance. This will help in assessing the performance of the employees.

(ii) Mid-Year Assessment:

The performance review takes place twice during the year. During the midyear review,

performance is reviewed almost after six months. It is to be done without writing down the

comments in the assessment report. At this stage no documentation is required formally.

During the review the work done by the person, difficulties faced during the work,

competencies shown, discipline, type of behaviour expressed and level of commitment given

should be recorded.

Through observation the information gathered will help the supervisor to prepare the mid-

year assessment report. After report a review meeting is to be conducted. For this it should be

communicated to all concerned. Through mutual discussion the date and time for the review

meeting will be decided. It should be communicated to all concerned. At the specified date,

time and venue the review meeting will be conducted.

The focus of the review meeting will be on overall performance and interruption will not be

allowed during discussion. The supervisor should explain the purpose of conducting the

meeting, present overall assessment of employees. During discussion if any doubt is there
then it should be clarified.

At the end of the meeting the supervisor should assure the employees for help regarding the

assessment problems and must thank to all participants for their participation. After the

meeting the final performance review form is to be filled up and the responses and comments

from supervisors and employees should be summarized.

The members should be encouraged to give if they have any other comments. Finally, the

complete report is to be signed by the supervisors and members. The proper file is to be

maintained for further reference.

(iii) Year-End Assessment:

On completion of the year the performance assessment is to be carried out. In every

organisation the appraisal practice is adopted. This brings the success, failure and obstacles

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faced during the year to the knowledge of managers and employees. All work-related aspects

are considered for evaluation of the performance.

The performance appraisal is generally done by supervisors, self, peers, juniors and all who

are directly or indirectly attached to the employees relating to the work. The major difference

between the two reviews is that no results or ratings are put on the paper in mid-year review.

The supervisor should tell the employee that the mid-year review explains the present result

and it is the preparation for the final assessment.

For the year-end assessment the supervisor should collect the information and motivate the

members to get involved actively so that the better results can be achieved. They can raise

questions regarding new ideas for development of performance, career development and

examples for achievements. The employees should explain the situations beyond control of

the employees and these should not be considered for appraisal.

For final appraisal different criteria like job proficiency, attitude, discipline, behaviour with

other persons, competencies on job, leadership, team-spirit, etc., are generally considered.

These may vary from organisation-to-organisation. Supervisor must motivate the persons for

self-appraisal.

The appraisal form will be filled by the supervisor. He must take proper time to study the

work of everyone before giving result or rating. Proper care should be taken to give fair and
impartial assessment.

Generally the following errors are likely to take place in assessment:

(a) General bias errors – It depends upon the attitude of the assessor. Some may be very strict

and others may be very liberal during the assessment work. They may not consider the actual

performance of the employees for assessment work. It affects everyone in general.

(b) Halo effect – During assessment when the assessor considers or gives importance to one

of the criteria of the assessment and ignoring the other factor, the error is likely to take place.

This is called halo effect. It gives wrong assessment of the employees.

(c) Relation rating error – When one task is related to another task then the assessor gives

importance to that logical relationship more. It creates the error in the assessment.

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(d) Contrast and similarity errors – The assessors assess the other employees based on their

own assessment. The assessment may be similar or contrast to assessment of the employees.

(e) Central tendency errors – When the evaluator does not take the extreme steps for

evaluation. He avoids the extreme two ends. He follows the central path and gives and

average rating for the performance. The range of assessment is very narrow. It dissatisfies the

excellent performers but protect the poor performers also.

(f) Proximity errors – When raters assess one high side then he assesses others also high side

this is called proximity error. He wants to justice with everyone but in the beginning he has

done the assessment on wrong side and that affects the whole assessment.

(g) Rating inflation – When supervisor’s rating goes very high without any reason is called

inflated rating. The supervisor should make that the ratings are on fact basis and not based on

emotions or feeling of individuals.

There is no hard and fast rules that these errors will take place with every assessor. But these

are like to affect the assessment work of the assessors. The assessors should keep these points

in mind and review the rating errors on regular basis. If the proper care is taken then the

assessment work will be adequate. Accountability can be rated as, does not meet standards,

needs improvement, meets standards or exceeds standards.

One each rating the assessor is supposed to give clear comments on the appraisal form. For
example, if the person exceeds standard then comment should be, “very good, keep it up in

future also”. Similarly, the other criteria like behaviour, leadership, quantity and quality of

output, discipline, commitment to the work, level of competencies, etc., are to be rated.

Finally the overall performance of the employees is to be rated. It should be followed by the

comments from the assessor. The assessor is to sign the assessment form and submit to the

concerned cell in HR department.

(iv) Documentation of Assessment:

In performance assessment stage the final activity is to be performed is documentation. This

activity is very important. In this the assessors have to fill up the assessment form. It should

signed and if needed should be sealed. The rating of the performance is to be kept

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confidential. Proper care should be taken so that the documents should not be tempered or

altered by anybody.

This document will be reference for review meeting for development plan preparation. The

remedial or development action will be taken on the basis of the assessment report. The

assessment report should be in black and white. The oral assessment report is not going to

serve the purpose. The person who is experienced in maintaining the documents must be

consulted.

Further, the storage of the documents also should be taken care of. If proper care is taken in

preparation, signature, communication and storage of documents the further planning work

will become very easy.

Step # 4. Final Review and Development Plan:

After performance assessment at the end of year the management go for final review of the

performance. They review of responsibility and accountability, performance standard

achieved, the competencies the employees possess, leadership quality shown, discipline

during work, teamwork, level of commitment and comments from supervisors and employees

will be studied in detail.

The efforts should be put by the management to find out the weak points in the process and

work on that so that for future there should not be any problem. The very objectives of the
performance management should be achieved. Timely and prompt action can be initiated to

control the problem in the beginning itself. The management should have the proactive

approach regarding the performance management process.

The final review and development stage must involve the following activities:

(i) Review of Performance Standard Achieved:

In the performance assessment the appraisal has been done. That performance will be

reviewed. There may be better performance standard the employees have achieved but

management is having innovative approach to look forward and find out how the

performance can be achieved better over the present performance standard.

The jobs have been assigned to the employees to perform. There accountability has been

fixed to perform and they are answerable to the management. How far they have achieved or

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fulfilled the responsibility. The standards of the performance in terms of quality, quantity,

discipline, leadership, initiative in problem, solving, costs, etc., will be reviewed. The

comparative study will be carried out to find out the deficiencies in these criteria.

The management will suggest the points to improve further if any deficiency is found in the

assessment. Further the management will review the consequences of the present

performance in future in highly competitive situation in the markets. Management is not

interested to take any chance of failure in the efforts.

(ii) Review of Competency Strengths and Weaknesses:

The different types of jobs are being done in an organisation as per nature and size of the

organisation. To perform these jobs a set of competencies is required. In competency we may

include skills; knowledge of job, ability, capability, .attitude, behaviour, etc. Management

will see that the people selected for the jobs to perform are right type of people.

They are having these competencies or not. If they are having then they expressed these

during the work or not. The difficulties faced by the employees during the year while

performing the jobs will be reviewed. They will find out why the difficulty has been faced

and who faced on which job.

Further, the areas where the employees have shown their required competencies and did not

face the problems will be reviewed. From these review the management will pinpoint the
areas where the development is needed. The suitable steps will be taken or suggested for

improvement.

(iii) Action Plan:

On the basis of performance assessment the review committee will have the input relating to

the performance standard, competencies, difficulties, behaviour, discipline, commitment,

initiative, etc. On the review of these where the deficiencies are found out the action plan will

be prepared. If the performance standard has not been achieved the jobs and performs will be

under the action plan for improvement.

The plan will be prepared for improvement in standard on the job and of individuals. If any

person is not having good behaviour, discipline or initiative in the work then the corrective

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action will be suggested against those persons. If the competencies are not shown by the

persons then steps will be initiated against them to correct them.

If there is no problem with the manpower but problem is found out with the machines then

the corrective steps will be suggested to improve the availability of the machines for use

through proper maintenance of the machines. The action plans will be prepared to remove the

problems with the machines, materials, manpower, and working procedures.

(iv) Development Plan:

From the review of the performance assessment or appraisal the review committee gets the

input for development plan. The experts are having the prevailing knowledge of the

prevailing market conditions and business environment. They get the update knowledge

about environmental factors like social, legal, economic, political, cultural, technology and

competition.

They are informed regarding the threats and opportunities for the company business in the

national and international markets. To survive in new business, grow and stabilize in the

existing business and further where the company is doing well to excel in performance, the

development plans are prepared by the review committee.

The committee can prepare development plans for training, education of employees,

arranging refresher courses for existing employees, changing of working procedure, on

replacement of technology totally fresh training programme, leadership development

programme, customer-orientation programme and many more programmes can be included in

the development plan as per the need of the time.

The main objective of development plan is to keep the organisation young and more effective

to do the business effectively and efficiently in the present cut-throat competitive market

situation.

(v) Identifying Rewards, Recognition and Compensation Plan:

During the work assessment some of the employees have achieved the standard more than

expectation. They must be identified and plan for their rewards and recognition should be

prepared. Their efforts should not go unnoticed. Their efforts should be recognized and

accordingly they should be appreciated.

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Further the compensation plan also should be prepared. The company is getting better results,

sales and profits. Out of these the employees should be paid. The payment can be made in

different forms. It depends on the compensation plan of the review committee. This will

contribute to improve the morale and motivation of the people. This will enable them to

create interest to do the work.

This way many problems can be avoided. Further it will make the things easier for the

management to achieve the standard of performance. Ultimately it will contribute a lot in

accomplishment of goals of the organisation decided. The objective of the organisation will

be fulfilled.

Performance Management – 8 Main Environmental Factors: Business Culture,

Legislation, General Economic Conditions, Industry Sector and a Few Others

The effects of context variables on appraisal processes and outcomes have been the object of

speculation but have not been empirically examined in the detail that these effects warrant. It

is believed that context is the key to understanding appraisal in organizations.

The business environment exercises both a direct and an indirect influence on the conduct of

performance assessment. Whereas legislation has specific consequences, most other

environmental factors have a diffuse and often unrealized effect on performance assessment
and pay structures.

The main environmental factors identified as having a contextual influence on

performance management include:

Factor # 1. Business Culture:

At the national level, culture affects performance management through sociopolitical

traditions and attitudes which determine whether performance assessment is acceptable, and

to what degree. Cultural norms dictate ‘acceptable’ standards of performance and the

management methods by which they are assured.

Factor # 2. Legislation:

In today’s globalized economy, the employment relationship between workers and employing

organizations is seen as a contractual matter. This relationship is expressed in formal or

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legalistic statements of obligation between the two, such as written employment contracts,

job descriptions and performance objectives.

Employers taking HR and administrative decisions on the basis of performance

assessment have to be mindful of possible legal action on the following grounds:

a. Validity or accuracy of assessment ratings as predictors of future performance and

promotion potential.

b. Validity or accuracy of ratings as measures of past behaviour.

c. Statutory norms laid down by the Government and Government authorities.

Factor # 3. General Economic Conditions:

Prevailing attitudes towards employees and, in turn, their response to performance

assessment are considerably affected by issues such as unemployment and economic

conditions of the nation. Growth and shrinkage in the job market which are influenced by

changes in the economic scenario of a nation is conventionally believed to be followed by

changes in the behaviour of workers and employers.

At times of high unemployment, workers are thought to be concerned about losing their jobs

and hence more conscientious and tolerant of strict management. When suitable employees

are scarce, managers must be cautious — unflattering assessments can trigger an employee’s

move to another organization leading to high attrition.

Factor # 4. Industry Sector:

Methods of performance management vary considerably between different industrial sectors,

partly as a matter of the nature of the work involved, tradition and fashion. Sales and service

dominated industries, such as retail business and financial services, tend to have clear

individual or team objectives which can be translated readily into performance targets.

Performance-related pay (PRP) is common in this sector. In other sectors like manufacturing

sector performance objectives are more diffuse and difficult to measure so that PRP is not

easily justified.
Factor # 5. Technological Change:

Technological change, particularly changes in information technology has a dramatic effect

on the nature of supervision, and hence performance assessment. Work can be done at a

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distance by traveling executives, overseas affiliates or telecommuters working from home.

This raises intriguing issues for performance management.

Further, technology has the capability to provide extensive information and statistics

regarding an individual’s performance that is being recorded on a real time basis into the

information system. This information not only provides a meaningful measure of job

performance but also provides a clear cut picture on the areas of performance improvement

and skill development.

Factor # 6. Flexibility and Diversification:

In the new business environment, the traditional nature of the employment relationship has

considerably changed, moving the balance of power firmly in favour of employers.

Organizations in today’s highly competitive era have seen job descriptions have disappeared

or, at least, have been diluted, so that employees can be asked to do virtually anything

required by the organization.

Conversely, performance criteria have been more tightly defined, typically expressed in the

form of demanding objectives- forever-moving goalposts. Performance assessment has

become the crucial means of monitoring this relationship.

Factor # 7. Employee Relations:

Performance management is a means of enhancing managerial control, particularly through

individual performance-related pay schemes. Individualization of pay (performance based

pay systems) diminishes or neutralizes the role of collective bargaining. The purpose and

influence of trade unions is thereby getting day by day diluted, reducing both their

effectiveness and attractiveness as an alternative focus for employee involvement.

Factor # 8. Workforce Composition:

One important function of performance assessment is the identification of individual

strengths and weaknesses of the employees. Strengths may indicate a potential star performer,

worthy of a management career route and promotion. Assessment employed to determine

development needs ultimately serves to increase a nation’s human capital. This helps the

organization to identify and streamline the composition of their workforce with people who

are the most competent in terms of their talents and abilities.

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Performance Management – Functions: Create Healthy Work Environment, Develop
Performance Plans, Selection of Appropriate People and a Few Others

The performance management is mainly concern with the performance of the people, systems

and organisation. To achieve this objective performance management performs a variety of

functions.

These functions are summarized below:

Function # 1. Create Healthy Work Environment:

HR or performance manager works with the people. Their objective is to create an

environment of openness, trust, mutual understanding, team-spirit and cooperation. In this

environment only the manpower can be utilized more effectively to contribute to

organisational goals.

They create environment with the help of HR policies, day-to-day dealing, rules and

regulations regarding leaves, welfare, promotion, discipline, incentives, training, etc. It

creates confidence in persons to work without worry.

Function # 2. Develop Performance Plans:

Management goes for planning of the job, competencies required for performing the jobs and

standards required for performance of the jobs. It includes job description, job specification

and fixation of job performance standard. Through these plans only the type of person

required can be ascertained.

Function # 3. Selection of Appropriate People:

To carry-out the various types of jobs in the organisation manpower is needed. The required

type and number of people are to be selected from the aspirants. So they may be made

available at right place in right time for accomplishment of the tasks at required time. This is

possible through proper recruitment and selection of employees.

Function # 4. Decision Regarding Performance Standard:

Performance management as a function of human resource management. The management

takes decision regardiFunctional Management – Prof. (Dr.) Parimal H. Vyasng the required

standards of the performance in consultation with top level management, head of departments

and experts or consultants. They consider the lowest, highest and average performance of the

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people at work. After detailed discussion the most realistic standards are fixed by the

management.
Function # 5. Plans for Development of Employees:

Performance management is interested for development of both employees and organisation.

With the development of one is the development of both. He conducts orientation of the

persons, provides education, and finds out the need for training and conduct training

programme for development of skills, knowledge and competencies. This can contribute in

improvement of the performance of persons and company.

Function # 6. Measurement of Performance:

After planning and development activities the next task of performance management is to

measure the performance of the people at work. For measurement of performance the

different criteria has been fixed such as output per hour/shift quality of work, behaviour,

discipline, level of commitment, etc. This helps to find out the poor and good performers out

of the lot. On the basis of it further remedial action can be taken.

Function # 7. Conducts Performance Feedback:

After measurement of performance of all employees the management finds the slow moving

persons. The objective of performance management is to find out the reasons for slow going.

They conduct coaching session for such people and give feedback to them. They suggest

ways to improve their performance also.

This clarifies many doubts of the employees. It helps a lot the persons to understand their

calibre and difficulties. Through the coaching and counselling session the attitude of the

employees is changed positive.

Function # 8. Design Compensation, Recognition and Reward System:

Through performance appraisal system the slow and fast working persons are identified. As

per the output the management designs the compensation, recognition and reward system. For

good performers the incentives are designed as per the output.

They are given better incentives, whereas slow working persons may be given less incentives

or may be denied. Good performers’ tasks are recognized by giving appreciation letter, prizes

or rewards. Sometimes they may be considered for further promotion also. This keeps on

motivating the people whether a slow or fast working person.

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Function # 9. Contributes in Developing Goodwill:

By performing the functions like creating good working environment, planning for

performance, measuring performance, providing performance feedback, designing suitable

compensation, recognition and reward system the management helps in improvement of the

performance as a whole. The work-related employee’s problems are sorted out.

It gives a sense of confidence and motivation among persons. These persons create publicity

by words of mouth inside and in the public outside. It contributes a lot in creating high

goodwill of the company. Provide promotional/career development opportunities for staff.

According to T.V.S Rao the performance management system includes the following

actions:

a. Identifying the parameters of performance and stating them very clear.

b. Setting performance standards.

c. Planning in participative ways where appropriate, performance of all

constituents.

d. Identifying competencies and competency gaps that contribute/hinder to

performance.

e. Planning performance development activities.

f. Creating ownership.
g. Recognizing and promoting performance culture.

Performance Management – Significance

The significance or importance of performance management in any organisation are

given here:

1. Defining Objectives and Targets – It helps to define the objective, aims, targets,

missions, vision, strategy and values of the organisation in order to enable them to

achieve in proper way.

2. Opportunities for Learning – Performance management system provide some

worthwhile opportunities to create and develop learning aspects and employment

advancements. It may be identify the competencies as required for high performance.

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3. Fulfil the Managerial Commitment – It is helpful to fulfil the required commitment

and assurances as given by the management. These are in the form of work facility,

job security, rewards and compensation promotion and career orientation

programmes.

4. Fair and Justified Treatment with Workers – Within the purview of performance

management, the employees can get fair, justified and optimum behaviour from the

management. There is a pre-required condition is that there is an utmost need to make

fair and justified treatment with employees.

5. Human Resource Planning – Performance appraisal information provides a valuable

input for skills inventories and human resource planning (HRP). By providing

information about the human resource strengths and weaknesses of the organisation,

the performance appraisal system helps determine the promotability and potential of

all employees. It, therefore, constitutes an important information base for developing

succession plans, HR programmes and creating new positions in the organisation.

6. Recruitment and Selection – It is used to validate or evaluate the approaches and

decisions relating to employees g recruitment and selection. It aims to determine the

effectives of them on a particular job as well as on organisation as a whole.

7. Training and Development – With a comprehensive role of performance management,

it can be assess the need and requirement of training and development. It can also

identify performance deficiencies at the individual as well as organisation level.

8. Motivation – A good plan of performance management aims to motivate work

appearances with better work culture. It motivate the employees to better work

culture, as well as to develop their efficiency for more and better work performance.

9. Increase in Efficiency and Productivity – An optimum performance plan ensure to

raise the efficiency and productivity of employees. A fair, optimistic and rational

performance evaluation system motivate the employees to raise their better work

performance.

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 10. Decrease in Turnover of Employees – The performance plan also aims to stabilise the

existence of employees as well as to reduce the employees’ turnover. It has the

signifying role to reduce a wide range of turnover in the enterprise.

11. Career Planning and Development – The performance management helps in

identifying employee potential and in planning future growth opportunities for the

employee. Information about the strengths, weaknesses and potential of employees

can be used to assist them in developing and implementing realistic career plans.

12. Compensation and Reward – A fair and objective performance appraisal system helps

in making differential reward decisions, such that the most productive workers or

teams are rewarded accordingly. When rewards and compensation are linked to

performance, it reinforces the belief that pay raises should be linked to.

13. Better Employee Relations – Performance management aims to maintain better

organisational cultural. Any dissatisfaction or grievances can be overcome or manage

by using performance data. As such, by using optimum system of appraisal the better

and most amicable relations with employees can be developed.

Performance Management – 5 Different Parts in Comprehensive Design:

Performance Assessment, Performance Appraisal, Performance Evaluation
and a Few Others
Performance Management is a wide and comprehensive segment. The concern seek to

determine and evaluate the performance of all employees on systematic systems. The

comprehensive design incorporate 5 P with their target oriented roles and functions.

The design have different parts as given here:

1. Performance Assessment (P1) – It is an information oriented task in that a process is

laid down to collect the data and information about the present and past job

performance of employees. The management suggest a top down evaluating approach

to make a decision about the adequacy and perfection of employees.

2. Performance Appraisal (P2) – It is a system by which an organisation assign some

score to evaluate the level of current or past performance of an individual or a group.

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 The individual performance is compared to a set of performance standards while

evaluating the score or criteria’s. Sometime it may also include the assessment task

also.

3. Performance Evaluation (P3) – It is used to extend the process to follow the

employees’ performance effectively. It is concerned qualitatively and quantitatively to

determine and evaluate the performance procedure on a set of standards of work.

4. Performance Review (P4) – It is more concern to study the final result as output of

employee’s performance and reconsider the checklist of strength and weaknesses of

the performance process.

5. Performance Competencies (P5) – It is more concern to evaluate the skill, knowledge

and capabilities of the job holder. It is the process of determining the relative worth of

different categories of competencies and in that the nature and responsibilities are also

analyse and evaluate etc.

Performance Management – Implementation (With Steps)

In any organisation, the performance management have a wider scope and it includes the

merit rating, assessment system, performance appraisal and online evaluation etc. Within HR

scenario it serves both evaluative and the development purposes.

For specified design and implementation of a wide and broader form of performance

management, certain steps to be followed in the development of its various systems are

as follows:

1. To determine the objectives, plans, programmes and procedural to manage and

organise the performance evaluation systems;

2. To determine the type or nature of jobs, skills, human resources and their performance

that the enterprise will require to achieve its objectives;

3. To determine and develop the performance standards for each performance

dimensions. These can be specify the expected levels of performance. The standards

are determined on the basis of quality and quantity as perceived by operating targets;

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4. To collect and using performance management informations to make managerial and

operating decisions, identify and overcome the problems and develop action plans for

per performance improvement;

5. Select and choose appropriate methods of performance appraisal which are based on

employees’ skill, performance status, job required, nature and types of job etc.;

6. Developing a plan to monitor and control over the employee performance. It is useful

in tracking corrective actions at the right time; and

7. Determining who will conduct performance evaluation like manager, supervisor or

any superior among the employees.

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